Major VED road tax and company car tax rate changes planned for 2020

The way Vehicle Excise Duty (VED) and company car tax is calculated is set to change from 6 April 2020, according to new Government proposals.

In September last year, the Government began replacing the existing New European Driving Cycle (NEDC) emissions tests with the tougher, Worldwide harmonised Light vehicles Test Procedure (WLTP) as a means of measuring fuel economy and emissions of new cars.

Current VED and BIK company car tax rates are still based on the CO2 rates achieved under the NEDC test, but from 6 April 2020, the Government is aiming for the vehicle tax on new cars to be based on the emissions achieved under the much tougher WLTP cycle.

Though manufacturers are already required to display the emissions and economy that new models achieve under WLTP testing, their VED road tax rates are still determined by CO2 ratings mesured under the NEDC test. This is partly because the 2020 target for manufacturers to achieve average fleet emissions of 95g/km is based on the NEDC test cycle.

• New real-world car mpg and emissions tests introduced

The DfT consultation says: "We are proposing that the change-over to WLTP specific CO2 emissions should take place from 6 April 2020. This will align with the use of the new CO2 figures for VED and company car taxation purposes."

According to the European Automobile Manufacturers Association, the WLTP tests will "result in a higher g/km CO2 value for a specific vehicle compared to the NEDC, simply because it is more rigorous than the old test." However, the association states that the move to WLTP-based vehicle taxes "should not negatively impact vehicle taxation by increasing costs for the consumer."

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